THE global COVID-19 pandemic has not only accelerated emerging trends but may have shifted human nature in ways that will impact the future of the property market.
CBRE has identified key trends that are forecasted to influence the Australian property market in the short and long term in their report, Building Immunity: Through Real Estate Post-2020.
Firstly, ‘the shift to thrift’, this was identified as a response to prolonged economic weakness causing households and businesses alike to reduce their spending.
For businesses this means an emphasis on the move from traditional office workforces to hybrid workforces, investing in technology to support remote working while reducing occupancy costs and increasing the flexibility of work practices.
For some occupiers this will also mean a move to “defer signing long-term leases in favour of short-term solutions offered by flexible space operators so they can efficiently dial up or dial down space requirements,” according to Bradley Speers, head of research at CBRE Australia.
There is also a projection of businesses increasing their investment in automation technology, reducing labour costs and putting focus on short-term gains from cyclical redundancies.
As far as the retail sector is concerned, large retail chains are expected to absorb smaller and boutique operators. Though with life returning to something closer to a pre-pandemic normal and government stimulus coming to an end, the gains seen over the year in household goods sales are likely to shrink.
“We think that conditions will be more challenging for large format retailers in 2021 compared to this year, whereas conditions for F&B retailers will improve from a very low base,” said Speers.
The second predicted key trend will be a continuation of the time savings seen in 2020, through remote working and related reduction in commuting time.
The report identifies the increase in investor demand for data centres to also fit under the umbrella of time savings. With 50% of all respondents expressing an interest in data centres, up from 2019’s 27%. This will also be focused on cloud data management, with estimates suggesting investments in traditional data infrastructure will fall by 3%.
Of course, in retail there is also the “structural nudge” upwards in online retail sales, where customers are purchasing products, they wouldn’t have in a pre-pandemic environment. This increase in online retail sales pushed the Australian penetration to an estimated 13.3% in the third quarter of 2020.
“We expect that even once the pandemic passes, online retail penetration will remain higher than if COVID hadn’t hit,” said Speers.
Supermarket and grocery sales also increased since the beginning of the pandemic growing by 9.7% between February and August.
“Accelerating an existing trend, this increase in ecommerce will drive demand for new warehouse space, infill delivery hubs and cold storage, as more grocery shopping is done online.”
Another key trend is towards a more local and less global market, as 2019 featured supply chain disruption as a major by-product of the pandemic. The report predicts a gradual increase in supply chain diversification, with a likely small shift towards local manufacturing.
“Onshoring could also be a theme that plays out to the benefit of the office sector. Telstra is a large corporation that is permanently moving some call centres back to Australia – will others follow?” Speers said.
Lastly, CBRE forecasts a turn towards a ‘healthier future. It is likely that societies focus on sustainability and the social responsibility of companies will only increase in 2021 and beyond.
“Even prior to COVID-19, there was an increasing trend of ‘flight shaming’ triggered by the ‘Greta effect’.”
“The combination of environmental concerns, business cost containment and wider adoption of virtual meetings combined will mean a slow recovery for corporate travel. There will also be heightened vigilance around workplace wellness,” concluded Speers.
